Global debt hit a record high of $337.7 trillion at the end of the second quarter of this year, driven by easing global financial conditions, a weaker US dollar and a more accommodative stance by major central banks, a quarterly report showed, quoted by Daily Sabah.
The Institute of International Finance (IIF), a financial services trade group, said global debt rose by more than $21 trillion in the first half of the year to $337.7 trillion. USD.
China, France, the US, Germany, the UK and Japan recorded the largest increases in US dollar debt levels, although part of this was due to the declining dollar, the IIF found.
The US currency has weakened by 9.75% since the beginning of the year against a basket of major trading partners.
Global debt growth comparable to COVID-era increases
„The scale of this increase was comparable to the growth seen in the second half of 2020, when pandemic-related policy responses led to an unprecedented accumulation of global debt,“ the IIF's Global Debt Report said.
Looking at debt-to-GDP ratios – an indicator of the ability to repay debt compared to output – Canada, China, Saudi Arabia and Poland saw the sharpest increases. The ratio declined in Ireland, Japan and Norway, the report said.
Overall, the global debt-to-output ratio continued to decline slowly, reaching just over 324%. However, in emerging markets the ratio reached 242.4% – a new record after a downward revision in the last report in May.
Total debt in emerging markets increased by $3.4 trillion in the second quarter to a record high of over $109 trillion.
Emre Tiftik, director of „Sustainability Research“ of the IIF, said rising military spending would strain government balance sheets amid rising geopolitical tensions.
Tiftik noted that the increase in debt was mainly in government debt, which has risen sharply in the G7 countries and China.
He added that bond market reactions were harsher in advanced economies, with the yield on G7 10-year bonds near its highest since 2011.
Bond Market Pressure
Emerging markets face record levels of nearly $3.2 trillion in bond and loan repayments through the rest of 2025, the IIF said.
Fiscal strains could intensify in countries such as Japan, Germany and France, urging caution about so-called “bond self-monitors““” – referring to investors who sell bonds of countries whose finances they deem unsustainable.
“While sovereign debt ratios rose sharply in emerging markets in the first half of the year – most notably in Chile and China – the market reaction has been stronger in developed markets this year”, the IIF said in a statement.
The report cited concerns about U.S. debt, noting that short-term borrowing accounts for about 20% of total debt and 80% of government bond issuance.
It warned that this reliance could increase political pressure on central banks to keep interest rates low, risking the independence of monetary policy.